The global economic crisis that began in 2007 was triggered by a banking crisis that created three main problems in the infrastructure finance markets:
• Virtually no capital markets issuance have taken place other than for some utilities and US municipal bonds.
• Banks have become capital-constrained. Since the onset of the crisis, there is less money to lend (through a combination of repairing balance sheets and increasing capital adequacy requirements). This means that competition between different lending options is intense and often long-term, relatively cheap lending to infrastructure is unattractive when compared with short-term, higher-priced corporate lending.
• Banks have become liquidity-constrained. The period over which banks manage their funding has considerably shortened, which exacerbates the mismatch banks have between lending long while borrowing over the short term to fund themselves.
However, the impact of these factors has varied significantly among different banks. Some institutions were able to offer only hard mini perm-style loans; others continued to lend long. But, it is unclear whether this remains a long-term strategy or a move to try to preserve the market.